The Risk of Deflation

Dive into this episode as we unravel the intricacies of deflation and its profound effects on economies. We'll explore why deflation is often seen as a pernicious economic phenomenon and why the Fed will always err on the side of inflation rather than deflation.From the shadows of the Great Depression to Japan's "lost generation," join us in decoding what these lessons mean for investors in today's tumultuous times.[00:00 - 05:05] Exploring Deflation and How Decreased Demand and Increased Supply Can Lead to Economic DisasterDeflation is when consumer and asset prices decrease over time, and your purchasing power increasesChina, the world's second-largest economy, has been sliding into deflationConsumers put off making big purchases, expecting to get more bang for their buck laterDeflation is associated with a negative correlation in terms of the real economyCauses of deflation include a decrease in demand or growth in supply[05:05 - 12:32] Navigating Deflationary Markets Between 1929 and 1933, the wholesale price index fell 33%, and unemployment peaked above 20%For 20 years, there was a lost generation of wealth creation within Japanese societyFed started quantitative easing policies to prevent a deflationary environmentChinese government initiating own round of quantitative easing for political reasonsPeople and businesses don't borrow, slowing economic activityJapan's experiences with deflation provide a good lesson for observersSign up for the Excelsior Capital newsletter at https://www.excelsiorgp.com/newsletter-sign-up/.Quotes:"It's challenging to restrict economic activities so severely while not bumping into recession still up in the air, whether or not we're going to be in technical recession or not." - Brian Adams"Real assets and private companies that can withstand that death spiral of debt will probably be your best play, but it's just something to be avoided." - Brian AdamsConnect with me on LinkedIn!LIKE, SUBSCRIBE, AND LEAVE US A REVIEW on Apple Podcasts, Spotify, Google Podcasts, or whatever platform you listen on. Thank you for tuning in, and Stay Tuned for the Next Episode COMING SOON!  Hosted on Acast. See acast.com/privacy for more information.